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Only A Quarter Of All Graduates Will Pay Off Loans

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http://www.independent.co.uk/news/uk/politics/only-a-quarter-of-all-graduates-will-pay-off-loans-2158168.html

Only one in four graduates will pay back the full cost of their tuition fees under the coalition's new system for financing higher education in England.

Internal government figures, seen by The Independent on Sunday, reveal that a small minority of students paying fees of up to £9,000 a year are expected ever to pay them off in full. Ministers believe most graduates will spend their whole working lives making monthly payments to cover their loans and interest – without ever being able to settle their debts.

The planning assumptions raise questions about the sustainability of the new system, just days after the Deputy Prime Minister, Nick Clegg, survived rebellion among his own Liberal Democrat MPs to get the proposals through the House of Commons.

A briefing note from the Department for Business, Innovation and Skills (BIS) has revealed that: 25 per cent of graduates will repay "at least 100 per cent of the original value of their loans in PV [present value] terms"; the "best-case scenario" foresees a maximum of only half of graduates settling their debts; up to 60 per cent will never pay in full.

Labour last night claimed the assumptions underpinning the new system raised questions over its sustainability, for graduates and universities alike.

The shadow universities minister Gareth Thomas said: "The Government's figures look more and more questionable.

"When even they think such a high number of students will not be able to repay their loans in full, it underlines just how unfair and unsustainable it is trebling student fees."

The Government has ruled that students must foot the bill for improvements in the higher education sector by allowing universities to raise their cap on tuition fees from £3,290 to £9,000 a year. But ministers ruled out an across-the-board "graduate tax" in favour of student loans, repaid when graduates enter the jobs market.

.........

But, despite the suggestion that the highest earners would carry most of the burden, an accountant last night warned that the lowest-earning graduates would not be protected, even if their salary remained below the payback threshold. Peter West said the combination of inflation and interest charges meant many graduates, including teachers, would never reduce the amount owed.

He said: "The Government tells us that those earning under £21,000 will not have to pay interest on their loans. But they will have to pay inflation in line with the Retail Prices Index, which is currently 3 per cent higher than the base rate of inflation.

"If you ask anyone what paying no interest on a debt means, they would say the amount owed stays the same. The Government is being dishonest about the implications of this system."

It appears that we are clearly moving to a lifetime of debt which the we will never ever get out of.

If only 25% will ever repay the entire loan who will pick up the losses for the money not paid back? I've not quite understood who foots this bill or is that something for the govt of the time to work out in 30 years time when the losses will start to become an issue? I assume the idea is that the Universities get the £9k up front leaving the debt with another agency, so when this agency doesn't get the original loan back and under the govt plans this clearly will be many people who'll never earn enough to pay any significant amount back who is going to eat the loss?

Or has this been clearly thought through and I've missed the explanation.

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http://www.independent.co.uk/news/uk/politics/only-a-quarter-of-all-graduates-will-pay-off-loans-2158168.html

It appears that we are clearly moving to a lifetime of debt which the we will never ever get out of.

If only 25% will ever repay the entire loan who will pick up the losses for the money not paid back? I've not quite understood who foots this bill or is that something for the govt of the time to work out in 30 years time when the losses will start to become an issue? I assume the idea is that the Universities get the £9k up front leaving the debt with another agency, so when this agency doesn't get the original loan back and under the govt plans this clearly will be many people who'll never earn enough to pay any significant amount back who is going to eat the loss?

Or has this been clearly thought through and I've missed the explanation.

I think you will find that this is another type of PFI in disguise. The taxpayer continues to pay for tuition fees, more than before because tuition fees are now "allowed" to inflate by the removal of the cap, but it is not on the balance sheet because it will eventually be paid by the students. Only it won't, it will eventually be paid by you and me as with everything else...

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Children just becoming adults today expect to have a worse life than their parents. We have created a society in which they are saddled with debt if they want the same educational opportunities as the previous generation. In which home ownership is far more difficult and expensive than it was for the previous generation. In which employment is far less secure and they are forced to compete with people from all over the world; people who will work for far less than them and live in societies in which the necessities of life cost far less, making it so much harder to compete for employment with them. In which idiots and fools are paraded as kings and queens, our children encouraged to emulate them. In which they are denied even the surety of a basic, competent education in favour of political point-scoring and the fawning administrations of gutless overseers.

The society that eats its own children does not deserve to survive, and frankly deserves everything that happens to it.

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It will keep the teachers employed, it will keep the universities running, it will keep the young doing something useful with their time and not idling on the dole queue....hopefully more will make good use from what they will have learned and there will be a job good enough and pays enough at the end of it so that they can repay the cost of their education....many will never repay, they will only learn to live another day. ;)

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http://www.independent.co.uk/news/uk/politics/only-a-quarter-of-all-graduates-will-pay-off-loans-2158168.html

It appears that we are clearly moving to a lifetime of debt which the we will never ever get out of.

If only 25% will ever repay the entire loan who will pick up the losses for the money not paid back? I've not quite understood who foots this bill or is that something for the govt of the time to work out in 30 years time when the losses will start to become an issue? I assume the idea is that the Universities get the £9k up front leaving the debt with another agency, so when this agency doesn't get the original loan back and under the govt plans this clearly will be many people who'll never earn enough to pay any significant amount back who is going to eat the loss?

Or has this been clearly thought through and I've missed the explanation.

Why does this appear to have been a surprise? (Or why wasn't this talked about prior to now?) The dots were there to connect, looking at the interest on the loan, the repayment threshold, the size of the loan and realising that a student needed to be earning around 50k before they started actually paying off the loan rather than the interest. For the current cohort it is something in the region of 40% going to university, the proportion of the working population with wages in excess of 50k is around........ 10%. There was no way that was going to work without even taking into account that wages change (in the past, increased) through people's working lives and that they tend not to start off on the same wage/level that they will retire at.

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Completely agree with JJJ.

It's already been widely reported that 70% of foreign EU students who have taken out a UK student loan are failing to repay. The system requires them to notify the British authorities of their ability to start paying off the loan.

http://news.bbc.co.uk/1/hi/education/7912548.stm

This state of affairs is clearly bonkers.

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Completely agree with JJJ.

It's already been widely reported that 70% of foreign EU students who have taken out a UK student loan are failing to repay. The system requires them to notify the British authorities of their ability to start paying off the loan.

http://news.bbc.co.uk/1/hi/education/7912548.stm

This state of affairs is clearly bonkers.

One of the reasons there is a hole in funding adn the new crop of students are going to be fleeced to pay for an education which will in most cases get them no more than decent A levels would have only just a decade or so ago.

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Completely agree with JJJ.

It's already been widely reported that 70% of foreign EU students who have taken out a UK student loan are failing to repay. The system requires them to notify the British authorities of their ability to start paying off the loan.

http://news.bbc.co.uk/1/hi/education/7912548.stm

This state of affairs is clearly bonkers.

Excellent.

I suppose the UK taxpayer gets to foot the bill for this? Perhaps we should cross charge it to our EU contribution and get it back that way.

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.......no.......after 30 years it is all over and the ex student can get his CEO post moved back to London.

...at present. In 5 years time, it will be "realised" that students can't pay back their debts, so it will have to come out of their estates. 100% guaranteed etc.

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guys - it is NOT revenue neutral, the whole point AFAIK is it IS subsidised, transferring the subsidy from university depratments to the students themselves, therefore creating a freer market in uni places and avoiding the previous quotas of funding to university courses

unsurprisingly non-employable university courses that previously depended on the central planning's favour are very upset as they will likely have to close down, I would have thought

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The interest rate is currently 4.4% (a doubling time of 15.75 years) - Interest rates are artificially low too.

The debt is currently written off at fifty.

I guess the country needs to find half a million jobs per year for each cohort of undergraduate students just to stand still.

As the degree is gradually devalued (in terms of its ability for the holder to find suitable employment) it will have less power in terms of producing a job that pays a salary (over 15k and soon over 21k) to pay off the debt.

Embarking on further study should lead to better emloyment prospects for early entrants. However, from the point of view of the taxpayer further study shortens the window of opportunity for repayment and reduces contributions towards the state pension. The debt write-off point at fifty will prove problematic.

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I think you will find that this is another type of PFI in disguise. The taxpayer continues to pay for tuition fees, more than before because tuition fees are now "allowed" to inflate by the removal of the cap, but it is not on the balance sheet because it will eventually be paid by the students. Only it won't, it will eventually be paid by you and me as with everything else...

+1 what he ^ said.

Edited by PopGun

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guys - it is NOT revenue neutral, the whole point AFAIK is it IS subsidised, transferring the subsidy from university depratments to the students themselves, therefore creating a freer market in uni places and avoiding the previous quotas of funding to university courses

unsurprisingly non-employable university courses that previously depended on the central planning's favour are very upset as they will likely have to close down, I would have thought

I'm sure you'll agree taking out an interest only mortgage (because you can't afford to also pay off the capital) is a barmy method to acquire a roof over your head. Now kids will effectively be doing exactly this, only for their HE education.

Sorry you've completely missed the point with this one, by a country mile. Read the thread, these loans won't get paid back, so subsidy and Mickey Mouse courses stays I'm afraid, only now it costs three times more.

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I think the original plan was for the debt to inflate as time goes on but the wage (£21000) at which debt repayment starts stays the same.

Under those circumstances it's almost inevitable that over 30 years a significant amount of the original loan will be paid off - even if a large part of the eventual inflated debt (including accumulated interest) is defaulted on.

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Sorry you've completely missed the point with this one, by a country mile. Read the thread, these loans won't get paid back, so subsidy and Mickey Mouse courses stays I'm afraid, only now it costs three times more.

no, YOU've missed the point, about markets and information

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Are you allowed to overpay especially at the beginning? If students are earning 21K and just started full time work then they should be able

to manage more than £20 a month.

They'll be needing to save up about £40K for the house deposit as well in order to get a 80%LTV on a 2 bed flat.

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I know this question might be a bit touchy feely for the hard nosed economists on here but:

What is the psychological effect of knowing you have a £30k plus debt, and the figure is increasing, and you can't earn enough in the foreseeable future to even begin to pay it off. (Yes I know many were only too happy to do this for bigger amounts for executive apartments etc, but they at least had the expectation of it paying back as an investment).

What percentage of people in this position would develop depression/addiction/mental health problems which they would not otherwise have done?

What percentage become desensitised to debt and eventually reach hopeless debt levels?

What would this cost?

Has anyone in the coalition or The Dept for Innovation etc considered or commented on this.

Y

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no, YOU've missed the point, about markets and information

Such a well thought out response there!

'Markets' are irrelevant when the state is still effectively picking up the tab, only at three times the original cost. If students were made to find their own sources of funding and pay their fees up front, You’d maybe have a point. Unfortunately this isn’t the case, and thus you clearly don’t know what you’re talking about.

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Children just becoming adults today expect to have a worse life than their parents. We have created a society in which they are saddled with debt if they want the same educational opportunities as the previous generation. In which home ownership is far more difficult and expensive than it was for the previous generation. In which employment is far less secure and they are forced to compete with people from all over the world; people who will work for far less than them and live in societies in which the necessities of life cost far less, making it so much harder to compete for employment with them. In which idiots and fools are paraded as kings and queens, our children encouraged to emulate them. In which they are denied even the surety of a basic, competent education in favour of political point-scoring and the fawning administrations of gutless overseers.

The society that eats its own children does not deserve to survive, and frankly deserves everything that happens to it.

did you write this?

excellent post

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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